Insiders say we're about to see Wall Street do some eye-popping M&A deals

There are some shockingly
large deals that have been announced recently — with more likely
on the way.Reuters

Mergers and acquisitions are back, and the rise of the big deal
is set to fuel banks’ top lines.

Since the second quarter kicked off last week, bankers and hedge
fund execs alike have been rubbing their hands with glee as a
spree of M&A, fueled by the expectation of prolonged cheap
money and expectations that oil may finally be bottoming, is
expected to push transactions that could top record value
amounts, several Wall Street insiders are now saying.

With a spate of transactions to kick off the second quarter,
deal value has already surged to $1 trillion for 2015. A
projected $3.7 trillion worth of deals this year would be second
only to 2007, when all M&A surpassed the $4 trillion mark.

Part of that comes on growing sentiment that, whenever the
Federal Reserve finally decides to increase rates, this won’t be
coming until after summer.

“Expectations for a delayed
rate hike have already been baked in,” says one bulge bracket
banker. “There seems to be no end to big M&A
coming.”

Seven of the 10 biggest
post-crisis deals have been announced in the last 16 months, with
more big transactions expected.S&P Capital data

And that’s on top of a ton of big, recent deals. Data housed by
S&P Capital IQ says seven of the 10 biggest M&A
transactions in the wake of the financial crisis have all been
announced within the last 16 months. What's more, S&P Capital
data shows the year-to-date announced deal value is, right now,
as high as it has ever been (including the bellwether year 2007).

"We expect continued momentum
in 2015, primarily due to rising competition among financial
buyers along with the fact that strategics are actively looking
for new opportunities," said Mounir Gad, vice president in
Silicon Valley Bank's financial sponsors group. "Companies are
cash-rich and access to outside capital is
abundant."

In 2015, premiums paid for some
M&A targets are on the rise

As deals have surged, so have
premiums: FedEx’s land-grab in Europe, in the form of a mega-buy
of TNT Express for $4.8 billion, came at a 33% premium to its
stock price. When Shell agreed to a $70 billion buyout of British
energy company BG Group, that came at a stunning 50%
premium.

Another big buy this quarter, of the software-focused LBO of
Informatica on Tuesday for $5.3 billion, represents the largest
private equity deal of 2015. While that pales in comparison to
the volume and value of PE deals at the last peak for M&A, in
2007, it is nevertheless expected that private equity firms will
keep putting capital to work to take advantage of what little
discounted debt regulators will afford them.

Coming at a time when activist investors are emboldened, perhaps
more than ever before, to push for companies to either strike
deals or break up, and when strategic bidders are both armed with
capital and can dominate the debt markets, more people on Wall
Street are expecting the biggest deals to come from corporates.

It might mean more
mega-deals in the media sector, or, alternately, breaking up
one-time behemoths in the tech sector. While they can't say for
sure where the next target for Carl Icahn or Nelson Peltz might
originate, bankers are expecting activists to start invading
boards and demanding change across the US this year.

In Q1-2015, ‘big deals’ made up more M&A than at
any other point this decade

Big deals are making up
more M&A value than at any other point this
decade.Dealogic

This, in turn, could push
bigger profits at Wall Street’s biggest banks. Many have not even
been able to process revenue from some of 2014’s biggest
announced deals, which have been held in regulatory limbo,
but packing the 2015 pipeline with even more billion-dollar
deals will prop up future earnings — as long as the
bulge bracket players don’t continue to cede market share to
the threatening swarm of boutiques.

This year, some enormous mandates have been swiped by boutiques.
Centerview Partners advised Kraft in the $45 billion deal with
Heinz announced in late March; and, this week, boutique
Robey Warshaw LLP in London was reported to be the sole
advisor to BG Group, netting the tiny office a massive payday.

And, in recent years, boutique investment banks’ share of M&A
in the US has risen substantially, although many of the firms
don’t have the same success competing against bigger competitors
internationally.

If what insiders are saying is true, though, there's going to be
enough going around for everyone.